Defense Finance and Accounting Service dropping contractor, will do work itself

The Defense Finance and Accounting Service will not renew Lockheed Martin's controversial contract to process pay for the nation's military retirees and will return the work to government employees in Cleveland, the agency announced Monday. The action won't result in a large gain or loss of jobs in Cleveland, where Lockheed Martin's workers are based, because the government will employ roughly the same number of workers as the contractor, a DFAS spokesman said. The number of Lockheed employees working on the contract has ranged from 400 to 700. The head of DFAS, Terri McKay, estimated the switch would save the government more than $20 million over the next 10 years and will "potentially improve service delivery and customer satisfaction." The change will take effect in early 2010. It is part of a widespread effort to reverse government privatization programs implemented by former President George W. Bush. Earlier this month, Defense Secretary Robert Gates announced the Pentagon will cut contracting for support services to pre-2001 levels, and will hire up to 30,000 new civil servants to replace contractors over the next five years. Lockheed Martin's handling of DFAS work has been criticized by Cleveland Democratic Rep. Dennis Kucinich. He accused the contractor of delaying payments to veterans, mishandling their cases, and charging taxpayers an exorbitant amount. Kucinich has wanted the Defense Department to return the work to government employees since a 2003 Inspector General's report found bidding on the contract was botched. "I am very pleased that DFAS will once again ensure quality service by operating this program 'in house' with trained and qualified staff," Kucinich said in a press statement. "I hope that this experiment in privatization will demonstrate to other agencies the costs, both financial and otherwise, of outsourcing the responsibilities of government." Lockheed Martin spokesman Joe Wagovich defended the company's performance, saying it delivered "more than $400 billion in benefits accurately and on-time" under the contract and that its work "achieved the highest customer satisfaction ratings." "We look forward to continuing our partnership with DFAS over the next year and will work closely with our customer to effectively transition the program," Wagovich said. Daniel Drost, a government worker at DFAS who has spent years helping Kucinich fight the privatization, said the switch will benefit military retirees and taxpayers. "The contract will be performed faster and cheaper," said Drost. "The irony of this is that 'faster and cheaper' used to be the privatization mantra. In the retired pay outsourcing case, those were hollow words."